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United Technologies gains after RBC upgrades Dow member, predicts 25% 2018 rally

  • Shares of United Technologies gained 1.2 percent after RBC Capital Markets upgrades shares to outperform.
  • "We view United Technologies as a high quality supplier of critical components in both industrial and aero markets with large installed bases," wrote analyst Matthew McConnell.
  • The analyst also raised his price target on the company to $160 from $124, representing 25 percent upside from Tuesday's close.
An attendee looks at an aircraft engine from Pratt & Whitney, a unit of United Technologies, on display during the China International Aviation & Aerospace Exhibition in Zhuhai, China.
Brent Lewin | Bloomberg | Getty Images
An attendee looks at an aircraft engine from Pratt & Whitney, a unit of United Technologies, on display during the China International Aviation & Aerospace Exhibition in Zhuhai, China.

United Technologies shares rose 1.2 percent Wednesday after RBC Capital Markets upgraded the industrial giant and Dow Jones industrial average member.

RBC Capital Markets upgraded the stock to outperform from sector perform Wednesday, arguing that recent underperformance is likely to subside and shares could pop 25 percent this year.

"We view United Technologies as a high quality supplier of critical components in both industrial and aero markets with large installed bases or products with a high cost of failure, driving recurring and predictable high-margin aftermarket sales," RBC analyst Matthew McConnell wrote in a note.

Shares of United Technologies rose 1.2 percent following the call. Shares of the jet-engine maker have underperformed the market over the past 12 months, up 16 percent versus the S&P 500's 19 percent climb.

The analyst raised his price target on the company to $160 from $124, representing 25 percent upside from Tuesday's close. McConnell noted that while investments in company segments such as Pratt and Otis have hampered performance recently, the company's patience is about to pay off.

Separately, RBC downgraded shares of United Technologies competitor Honeywell on Wednesday.

United Technologies made headlines in September after agreeing to buy aircraft parts manufacturer Rockwell Collins for $30 billion. Under the deal, the companies said the Rockwell Collins and United Technologies's aerospace systems segments will be combined to create a new business unit named Collins Aerospace Systems.

CNBC's Michael Bloom contributed to this report.